Shell to complete LNG terminal study next year

MANILA, Philippines - The local unit of oil giant Royal Dutch Shell Plc. will complete its feasibility study for a $1-billion liquefied natural gas (LNG) import terminal by the middle of next year.

For the government-required public share sale, Pilipinas Shell Petroleum Corp. will have to wait for resolutions of major tax cases, a top company executive said.

“We have to complete the study as soon as possible. Realistically sometime next year...we see second or third quarter next year,” Shell country chairman Edgar Chua told reporters.

Early last month, Shell signed a deal with the Philippine government for a joint technical feasibility study of putting up a LNG terminal adjacent to Shell’s existing refinery in Batangas.

“The idea of the LNG import facility is to help the government broaden the market for natural gas. Without waiting for additional gas finds, let us import,” Chua said.

“We are hoping that by 2016, we will be able to deliver first gas from the import facility,” Chua said.

Possible gas sources are Australia, Qatar, countries in the Middle East and Canada, Chua said.

Shell is in talks with several potential buyers of LNG, which include natural gas-fired power plants and small firms in industrial areas that want to shift to LNG from the more expensive diesel.

Meanwhile, there are still issues preventing Shell from conducting an initial public offering (IPO).

“Timing would be dependent on market and also the resolution of our tax cases,” Chua said.

The PSE index (PSEi), a basket of 30 stocks regarded as the benchmark of the market’s overall performance, surged 20 percent in the first half after hitting all-time highs 19 times. The PSEi posted a new record by closing at 5,369.98 on July 5.

So far, the market conditions are favorable for listing in the local bourse, Chua said.

But Shell is waiting for resolutions on its tax cases. In a decision last April, the First Division of the Supreme Court said Shell should not have been exempted from paying P95 million of excise taxes for its exported fuel products.

Under the Downstream Oil Industry Deregulation Act of 1998, oil refiners should offer at least 10 percent of their shares to the public three years after the law’s passage.

But over the past years, Shell has been deferring its IPO, noting that market conditions are not conducive yet for a public offer.

Meanwhile, Shell is open to joining the government’s plan to put up a LNG pipeline from Batangas to Manila.

“The pipeline is going to increase the market available to the facility. The pipeline will enhance the investment environment,” Chua said.